Last week the FTC hosted “Paper, Plastic … or Mobile? An FTC Workshop on Mobile Payments,” to examine the use of mobile payments in the marketplace and how emerging technologies affect consumers. The workshop lasted throughout the day, consisting of presentations and panels with representatives from business, law, finance, and consumer advocacy organizations. At the outset, David Vladeck, Director of the Bureau of Consumer Protection at the FTC, stated that the purpose of the workshop was to “understand and identify [mobile payment] issues before they become widespread,” and to “build best practices for adoption” by the mobile payment industry.
Mobile payment systems allow consumers to make purchases using their mobile devices, as opposed to using cash or plastic debit or credit cards. The industry is growing at a dizzying pace—mobile payments in the U.S. totaled $240 billion in 2011 and are expected to rise to $670 billion by 2015.
As was discussed at length during the workshop, mobile payment technology is in a frenzied state of innovation and flux. Companies have already brought to market systems that allow consumers to pay using their existing cards stored in a virtual “wallet” on their phone, to pay by adding the charge to their mobile carrier bill, or to pay using virtual “cash” pre-purchased from the mobile payment provider and decremented from a stored account. As the panelists and presenters pointed out, the transactional stage has its own set of technological options. Depending on the mobile payment system chosen, consumers can pay by placing their phone next to a receptor (known as Near Field Communication, or “NFC”), by sending a text message to the merchant, or by scanning a bar code that appears on the screen of their mobile device.
On the other side of the counter, merchants are using mobile payment systems in a variety of ways. Electronic recordation of their transactions allows for easier implementation of loyalty programs, while location-based mobile services give merchants the ability to target discounts to potential customers in proximity to their store. With streamlined data collection across the transactional and social networking platforms, businesses gain access to high-level data analytics about their customers previously unimaginable.
The workshop discussed the many benefits consumers will reap—and already are reaping—from mobile payments. Savings, in the form of synchronized discounts and loyalty programs, as well as the digitalization of receipts are only a few that were mentioned at the workshop.
On the other hand, the workshop provided insight into, and robust discussion of, potential difficulties that consumers could face with mobile payment systems. The FTC steered the discussion to three specific areas: (1) privacy, (2) data security, (3) payment dispute resolution. Panelists, presenters, and moderators underscored the importance of developing a legal and regulatory framework that would encourage innovation in the industry while ensuring consumers remain protected in these areas.
In a separate presentation not scheduled on the official program, staff from the FTC Mobile Technology Unit revealed that they had conducted a study of 19 mobile payment providers to “observe what disclosures are made to consumers regarding these companies’ dispute resolution policies.” While FTC staff emphasized that the Commission was not drawing any conclusions from the study, the slides emphasized consumers’ total liability for fraudulent or unauthorized purchases, as well as the sharing of consumers’ personal information with third parties.
Overall, the workshop provided a comprehensive overview of the mobile payment ecosystem. The panels—comprised of top industry insiders from Google, MasterCard, mobile payment startups, and many other actors in the mobile payment business chain—provided the public not only with a sense of how the mobile payment industry operates, but also with a sense of where it may be headed. Reports from the FTC and consumer advocates offered a glimpse into how legislators and regulators may be thinking about striking the balance between the costs and benefits to consumers as we move toward a future where mobile payments are the norm rather than the exception.